To predict what will happen in Obama’s 2nd term, look at his 1st (Commentary)
By Robert J. Scamardella
Via SiLive.com – During President Obama’s second term our economic problems will intensify. The president’s focus will be on wealth redistribution and entitlement increases to attain “social justice”. He will pay little heed to economic growth or deficit reduction. Obama’s conviction is that the tide of history runs in one direction — toward more government and social liberalism.
Obama won re-election and his inaugural address showed that he lacked any interest in entitlement reform or debt reduction. In that address, “An economic recovery has begun.” was all Obama said about the economy. Nothing about how to increase sluggish economic growth.
His state of the union address did lay out his solution to increased economic growth. It was, as expected, more government spending.
Both speeches ignored the central threat to western democracies, that is, the increasingly insolvent entitlement state. They proved that Obama is the advocate of the ever-expanding state. His speeches are venerations to collectivism. To Obama the only “collective” is the government. Ignoring the voluntary religious, cultural, charitable and advocacy associations that are the splendor of American “collectivist” activity he used the word “together” four times in his Inaugural speech. In his mind “together” and government are one.
The President also said, “The commitments we make to each other through Medicare and Medicaid and Social Security, these things do not sap our initiative, they strengthen us. They do not make us a nation of takers; they free us to take the risks that make this country great”.
Say what? Isn’t it self evident that entitlement programs do not increase risk taking? Doesn’t the expansion of entitlements make us “a nation of takers.”? If the President’s riff were true wouldn’t we want to increase the people dependent on Medicare, Medicaid and Social Security since it makes us “stronger”?
We reject the belief,” Obama said at his inauguration, “that America must choose between caring for the generation that built this country and investing in the generation that will build its future.” I’m not sure what this means but I know its practical effect. There will be no entitlement reforms in the next four years.
Medicare, Medicaid and Social Security are essential and must be preserved but they cannot be maintained on borrowed money. They must be modified to insure their long term viability. Without courageous Presidential leadership the United States will never muster the fortitude to reform entitlements and control borrowing.
Everyone knows that these programs are unsustainable. Obama will let the problem worsen and leave the mess to his successor.
Obama vowed to defend and expand the 20th-century welfare state. He ignores the fact that Social Security was created when life expectancy was 62 and Medicare started when medical technology was in its infancy.
America rarely faced such enormous economic problems. We confronted major debt issues after World War II but the Social Security program was new and Medicare didn’t even exist. Government costs were drastically cut when wartime programs ended and the military scaled back. Those postwar cuts were real reductions in government spending. Today’s Republicans, like Paul Ryan, propose no real cuts, seeking only to reduce the rate of growth in future spending, still Obama wails.
The notion of actually cutting real government spending— not just slowing its growth — is a non-starter in the White House. The President knows that the Federal Reserve, in conjunction with the U.S. Treasury, can create more money simply by issuing more debt.
The massive debt America is incurring will likely never be repaid. Once it dawns on America’s creditors that repayment becomes tentative, things will get very interesting.
No one can predict when the financial tipping point will occur. But Obama’s second term will multiply our debt, even as taxes are hiked. Under such conditions another recession is possible (The economy shrunk in the last quarter of 2012). Where we go from there is anybody’s guess.
Obama’s first term saw $1 trillion per year deficits and our national debt hit $16 trillion. I predict this will continue and by 2016 our debt will reach $20 trillion. The number of unemployed will grow. Incomes will continue to stagnate.
Whether it gets even worse, hinges on interest rates. Currently, our debt is tolerable due to historically low interest rates. Suppose interest rates rise to 10%? (Many remember the 18% rates of the late 70’s). If our debt reaches $20 trillion we’d spend as much on interest as we do on Social Security, Medicare, and Defense combined.
At that point our only options would be to monetize the debt (print money to pay it off and risk hyper- inflation) or simply default. Neither of which is good and the ensuing chaos might well usher in an end to America as we know it.
Maybe I’m wrong. In 2008 President Obama spoke ardently and repeatedly about the dangers of debt and the cost of interest on that debt. He pledged to cut the debt in half during his first term. He didn’t keep that pledge.
Although his inaugural and state of the union addresses gave no hint that this will be the case, perhaps Obama will pull a “Nixon to China” while tackling entitlements and debt in some great compromise with the Republicans. For the sake of my children and grandchildren I can only hope and pray that he does.